News Release

NASD Fines Citigroup, Credit Suisse and Morgan Stanley $775,000 For Deficient Price Target, Ratings, Other Disclosures in Research Reports

Washington, D.C. — NASD announced today that it has imposed fines totaling $775,000 against Citigroup Global Markets, Inc., Credit Suisse Securities (USA), LLC (formerly Credit Suisse First Boston, LLC) and Morgan Stanley & Co. Incorporated for numerous violations of NASD's research analyst conflict of interest rules.

NASD fined Citigroup $350,000, Credit Suisse $225,000 and Morgan Stanley $200,000. In addition to the fines, Citigroup and Credit Suisse agreed to review research reports and certify to NASD that they contain proper disclosure of price target valuation methods and risks. Those reviews and certifications must take place quarterly, for one year.

"The failures on the part of Citigroup, Credit Suisse and Morgan Stanley to abide by these rules undermine the important disclosure obligations mandated by NASD in the wake of the research analyst conflict of interest scandals," said James S. Shorris, Executive Vice President and Head of Enforcement. "These cases should send a clear message to firms that NASD expects full compliance with the research disclosure requirements, especially after NASD notifies a firm that its practices violate our rules."


NASD found that from July 2002 to May 2005, Citigroup failed to include in more than 2,500 technical and quantitative research reports numerous disclosures required by NASD's research analyst conflict of interest rules. In June 2004, NASD's Advertising Department found that Citigroups's research did not contain the required disclosures, a finding that the firm acknowledged. At that time, NASD instructed Citigroup that it must bring its research into compliance and reiterated this position in a December 2004 meeting. The firm's delinquent efforts to comply with NASD disclosure rules were hampered by a lack of effective or timely corporate support, including the failure of the firm to commit adequate funds or resources. Lacking sufficient funds and without a game plan for completion, Citigroup's efforts were characterized in a June 2004 internal email as being "in limbo." Citigroup did not bring its research fully into compliance with NASD disclosure rules until May 2005, more than two years after the effective date of these rules.

Credit Suisse

NASD found that from February 2003 to November 2005, Credit Suisse regularly published equity research reports that violated NASD price target disclosure rules by using unclear language to describe price target valuation methods and the risks that might impede achievement of the price target. During that time, Credit Suisse published approximately 11,000 research reports per year. The firm continued to publish research reports containing deficient price target disclosures despite two warnings by NASD Advertising in February 2003 and August 2004. Credit Suisse also failed to enforce its written procedures concerning price target disclosures.

Morgan Stanley

NASD found that from March 2003 to June 2004, Morgan Stanley published over 22,000 equity research reports that failed to disclose, in a clear and prominent manner, the percentage of securities to which it would assign a "buy," "hold/neutral" or "sell" rating as required by NASD rules. Additionally, from March 2003 to July 2005, Morgan Stanley published 21,000 equity research reports that failed to disclose adequately so-called "analyst industry view" ratings - a rating system used to measure the performance of the analyst against a selected broad market benchmark, such as the S&P 500. Throughout these time periods, Morgan Stanley received repeated notices from NASD Advertising that their research reports failed to comply with applicable disclosure rules, yet the firm failed to take reasonable or prudent steps to correct these deficiencies.

In connection with these settlements, Citigroup, Credit Suisse and Morgan Stanley neither admitted nor denied the charges, but consented to the entry of NASD's findings.

Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2005, members of the public used this service to conduct more than 4.3 million searches for existing brokers or firms and requested more than 194,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at Investors can also access this service by calling (800) 289-9999.

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